CAMPBELL SOUP CO. $53 (New York symbol CPB; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 309.8 million; Market cap: $16.4 billion; Price-to-sales ratio: 2.0; Dividend yield: 2.4%; TSINetwork Rating: Above Average; www.campbellsoupcompany.com) is the world’s largest maker of canned soups. It also makes Prego canned pasta and sauces, Pepperidge Farm cookies and V8 vegetable juices.
Campbell’s sales were flat, at $7.7 billion, in 2011 and 2012 (fiscal years end July 31). In 2013, it cut its reliance on canned foods through two acquisitions: a $1.55-billion deal for Bolthouse Farms, a producer of carrots, dressings and fruit juices; and $249 million for organic food maker Plum.
These additions increased sales to $8.3 billion in 2014. However, unfavourable currency rates cut sales to $8.1 billion in 2015.
Campbell’s earnings fell 7.4%, from $846.0 million in 2011 to $783.0 million in 2012. Per-share profits fell just 3.9%, from $2.54 to $2.44, on fewer shares outstanding.
Earnings turned around in 2013, and rose to $2.53 a share (or a total of $800.0 million) in 2014 but declined to $2.46 a share (or $769.0 million) in 2015. The company aims to boost its sales by making its foods healthier. Its plans include removing artificial colours and flavours from its soups, cookies and other products in North America by 2018. Campbell will also keep expanding its line of organic foods.
Big savings on the way In addition, the company is eliminating management positions and merging overlapping functions at its various divisions. It expects these actions to save it $250 million a year by the end of fiscal 2018.
Campbell’s balance sheet is sound: as of November 1, 2015, its long-term debt was $2.55 billion, or 16% of its market cap. It also held cash of $263.0 million.
The company’s earnings should improve to $2.79 a share in fiscal 2016, and the stock trades at 19.0 times that forecast. That’s an acceptable p/e ratio in light of Campbell’s well-known brands and falling costs. The $1.25 dividend yields 2.4%.
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